Monthly Archives: January 2016

Earlier this year, MIT researchers were the latest in a series of analysts to raise alarm about the perceived limitations of solar PV’s continued growth. In short, these analysts propose that variable renewables will depress wholesale prices when they run, thereby limiting their own economic success.

These concerns have garnered coverage in other venues (including Vox, Greentech Media, and The Financial Times), leading observers to suggest that the future prospects for renewables may be dim.

But are these concerns really justified, or do they rely on outdated assumptions about the grid and about electricity markets? We argue that these critiques, assuming a static grid and unchanging market mechanisms, can be used to make any innovation look bad. However, more integrative assessments of a least-cost, clean, and reliable power system of the future will factor in high fractions of variable renewables, along with more-efficient markets (and usage) and new technologies to integrate these resources seamlessly and resiliently.

In this article, we argue that falling wholesale prices is a good problem to have, and that concerns about economic limitations ignore remedies available from supply-side evolution, demand-side resources, and updated market mechanisms. As the world gathers in Paris for COP21, these messages are as important as ever for charting and pursuing a low-carbon clean-energy pathway.

Understanding the “Problems”

There has been increasing concern that variable renewables such as wind and solar may face an upper limit to adoption in the U.S. grid. The argument is that large amounts of variable renewables will create excess supply concentrated at the particular times of day when they produce. The notorious “duck curve” is an example of this—the duck-like shape of a particular, daily demand curve modeled for California’s grid when the production of large amounts of solar photovoltaics (PV) is netted out.

Critics argue that this technical characteristic of variable renewables, specifically PV—a daily generation pattern that is not perfectly matched with load—can have economic consequences for all forms of generators, especially the renewable resources themselves. Large amounts of renewable resources can sell a glut of power when it’s available, offsetting production from higher-marginal-cost resources (like gas-fired power plants). Since power prices are generally set by the resources with the highest marginal cost that clear in the market, additional generation from renewables tends to lower market prices.

This “merit order effect” often decreases revenues for fossil generators. This impact has been particularly dramatic in Europe, where generation from costly-to-run thermal plants during the daily solar peak was formerly very profitable for fossil generation owners. PV has decreased energy prices so much there that the top 10 EU utilities lost half their market capitalization. However, the merit order effect also means that variable renewables themselves may also earn lower profits as their adoption rises. A common conclusion is that variable renewables can play only a modest role in power production, marginalized by declining wholesale value at higher adoption levels.

The Other Half of the Thought Experiment: Three Factors That Can Accelerate Renewable Energy Adoption

Analysts who have put forth these arguments have elaborated only the first half of a microeconomics thought experiment. The problems they hypothesize hinge upon the laws of supply and demand, but omit important aspects of both, drastically overstating the perceived “problems.” Let’s see how.

1) Supply is changing holistically, not incrementally

Many of these thought experiments consider adding just a single supply resource (often solar PV) without considering many of the other supply-side changes happening at the same time. In reality, solar PV, wind, and natural gas are all joining the supply mix in a big way at the same time; the first two are often complementary and the third is dispatchable, so together, they can do a lot to mitigate the “duck curve” often portrayed.

At the same time, retirements of uneconomic assets will provide a countervailing buoyancy to wholesale prices. For example, even though old, dirty plants often have low production costs, they may exit the market anyway due to high costs of compliance upgrades or other fixed costs that erode their profits. The resulting less-abundant supply can cause the marginal supply curve to contract in quantity, leading to higher prices and higher profits for renewables and remaining fossil generators—unless demand drops too, as it’s doing in the industrialized world.

2) Demand is increasingly flexible, not fixed

Analysts arguing that renewables’ variability will limit their growth often assume perfectly efficient wholesale markets, but unchanged retail markets and fixed demand profiles. This incomplete and asymmetrical treatment ignores the emerging capability to harness the demand side of the equation. For example, people like and respond to time-varying pricing programs, and these programs are starting to roll out at scale. The electricity demand of many appliances including electric water heaters and electric vehicles is inherently flexible without disrupting the service provided. Furthermore, new business models (from both utilities and third parties) are driving this convenient flexibility by providing seamless solutions, unobtrusively, conveniently, and without requiring customers to become part-time energy traders.

These factors together increase flexibility of demand, an important low-cost resource, and enable what is the most natural response to changing prices in an efficient market where consumers find ways to use and benefit from cheap electricity from wind and solar. In other words, as renewables reduce energy prices during certain times of day, demand flexibility allows customers to shift demand to those times, which will both reduce energy prices at other (peak) times and raise the price paid to renewables during times when they produce the most.

Storage is already a common feature of concentrating solar power (via molten salt), and becoming an increasingly common feature of solar PV. For example, the all-renewable winning bids in the latest Chilean auction for unsubsidized electricity included not just solar power as low as $65/MWh in the daytime, but also nighttime solar power—via thermal or electrical storage—for $97/MWh at night. With storage, variable renewables become dispatchable, and dispatchable renewables do not have nearly the same merit order effect as variable ones. To be sure, our recent demonstration that 13 kinds of benefits of behind-the-meter distributed storage can make batteries cost-effective does not necessarily make them competitive with the many other ways to achieve grid flexibility, but similar reasoning suggests an abundant range of options for averting the problems that narrowly constrained models imply.

Whole-System Thinking Illuminates a Path Towards Least-Cost Outcomes

Analysts arguing that renewables will economically limit their own continuing adoption generally leave out the considerations listed above—and more importantly, these arguments are built on incremental thinking, assuming that today’s grid and markets are fixed and only one thing changes (e.g., PV or wind-energy market share). A more holistic, integrative, and accurate analysis would start with the ultimate objectives (reliable, resilient, and least-cost energy services), and promote a whole-system design to get there promptly.

With this perspective in mind, the characteristics of renewable energy that have caused so much hand-wringing—variable output and near-zero marginal costs of production—simply add to the list of design considerations for a market design that rewards efficient investment. Given supply diversity, demand flexibility, and emerging technologies like storage, variable renewables are unlikely to face any practical limit to growth even under current grid paradigms and market structures.

Nothing Sacred About Existing Markets

But even if renewables do face adoption limits in current markets, there is no reason we have to keep these markets the way they are. Wholesale power markets are largely a product of historical coincidence, formed out of the paradigms of the last century in which thermal power plants competed only with each other. Modern market design that reflects the realities and changing resource mix of the 21st century grid, being pioneered in Germany already, can go a long way towards aligning incentives for least-cost resource mixes. Particularly, incorporating behind-the-meter distributed energy resources and flexible loads into energy markets—as is being done in California and New York—can bring new capabilities and a refined level of control to the grid.

An Integration Challenge?

Evolving supply, flexible demand, storage, and updated markets can remove the limits to increasing renewable energy on the grid. In a later post, we will highlight how these same levers can address the common concerns—and misunderstandings—about “integration costs” of renewable energy. For example, a much-hyped recent paper claims that high-penetration renewables must incur steeply rising integration costs. But that turns out to be an artifact of extremely restrictive assumptions in the models used, combined with an assertion that competitive harm to thermal-plant incumbents is an economic cost of the renewables that beat them.

Renewables Are Here To Stay

The “problems” with renewables often brought up by analysts may be real in isolation, but are overstated when the full range of options is considered. Indeed, these are good problems to have: they’re the natural forces of supply and demand acting to send signals to market participants to diversify resource choice, incentivize demand flexibility, and invest in storage and other emerging technologies. Arguments against wind and solar PV conclude that these resources will need greater subsidies to survive in the “duck curve” era. But instead, we can tap the latent power of supply diversity, demand flexibility, storage, and market design to level the playing field for all resources, rather than clinging to the premises of the 20th century grid. Protecting the old system is far inferior to enabling the new one so that innovation can flourish, entrepreneurs can thrive, and all options can compete fully and fairly. Source

Islands predominated in the Paris COP negotiations.[1] From metaphor to moral compass to declarations of kinship—like President Obama’s— the small island developing states’ vulnerability, dignity, and ambitions served as a rudder.

“I’m an island boy” — President Barack Obama

Among other significant provisions discussed below, the response of the Agreement and the decision text—the latter a supporting though not legally binding document—and to demands for capacity building and efficient, simplified procedures for accessing financial resources directly addressed small islands’ concerns. And so the closing movements of the meetings offered congratulatory and hortatory words from island representatives, including a spontaneous, harmonized chorus of Bob Marley’s Three Little Birds stressing the refrain, “Every little thing is gonna be alright.”[2]

Small island states representatives are, however, clear-eyed about the potential of the Paris Agreement and understand that it is but a foothold in a much, much steeper journey. In Paris they were represented primarily by the Alliance of Small Island States (AOSIS) negotiating bloc, a coalition of small island and low-lying coastal countries that share similar development challenges and concerns about the environment, especially their vulnerability to the adverse effects of global climate change. AOSIS, with 44 members and observers from all regions of the world, works as a negotiating voice for small island developing states (SIDS).

The small islands representatives demanded a number of elements, including a long-term temperature goal of “well below 1.5 degrees” Celsius above pre-industrial levels, an indicative pathway to achieve it, an international mechanism on Loss and Damage due to climate-related events, and scaled-up, reliable financial resources above the $100 billion per year by 2020 already promised by developed countries to developing nations, particularly the most vulnerable.[3]

1.5˚C to stay alive

Beginning with the 2009 COP15 meetings in Copenhagen, SIDS and particularly the atoll nations noted the existential threat of a 2˚C ceiling on temperature rise. The calls for 1.5 to stay alive were, however, largely relegated to the tense hallways of Copenhagen’s Bella Center six years ago. The 2015 final decision text and Paris Agreement, in contrast, emphasize the urgent need to hold increased global average temperature to “well below 2˚ C above pre-industrial levels” and to pursue efforts to limit the temperature increase to 1.5˚ C.

This is palpable progress, meeting in part a demand of island states, but is not supported by the remainder of the text. While the Agreement calls for global peaking of emissions “as soon as possible,” it does not require complete decarbonization of global economies, opting instead for a balance between anthropogenic emissions by sources and removals by sinks. The absence of the decarbonization mandate makes the 1.5˚ C goal almost entirely illusory. Settling on and supporting a1.5˚C ceiling will be a critical next step in future decision-making. More

By year’s end, Jamaica will add 115 mega watts (MW) of renewable capacity to the power grid, in its quest to reduce energy costs and diversify the energy mix in electricity generation to 30 per cent by 2030.

With 90 per cent of its electricity coming from fossil fuels, the government is committed to reducing the country’s carbon emissions by increasing the amount of electricity generated from renewables from 9 per cent now, to 15 per cent by 2020.

Junior Minister Julian Robinson told IPS via email, a National Energy Policy is guiding actions to cut costs and comply with the international agreements to reduce carbon emissions; among them are plans to reduce the amount of electricity generated from petroleum from 95 to 30 per cent.

The Caribbean region stands at a crossroads, faced with several critical challenges associated with the generation, distribution, and use of energy. Despite the availability of tremendous domestic renewable energy resources, the region remains disproportionately dependent on imported fossil fuels, which exposes it to volatile oil prices, limits economic development, and degrades local natural resources. This ongoing import dependence also fails to establish a precedent for global action to mitigate the long-term consequences of climate change, which pose a particularly acute threat to small-island states and low-lying coastal nations.

While onerous, these shared challenges are far outweighed by the region’s tremendous potential for sustainable energy solutions. By acting on this potential, the Caribbean can assume a leading role in the global effort to combat climate change while promoting sustainable regional economic and societal development. Representing a geographically, culturally, and economically diverse cross-section of the region, the Caribbean Community (CARICOM) provides the ideal platform to construct the legislative and regulatory frameworks necessary to achieve this transition.

CARICOM represents 15 diverse member states: Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Lucia, St. Kitts and Nevis, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago. Although these states vary widely, they face many common energy challenges.

CARICOM has already begun to play a crucial role in the regional transition to sustainable energy. Recognizing the need to develop a coordinated regional approach to expedite uptake of renewable energy and energy efficiency solutions in the Caribbean, CARICOM adopted its regional Energy Policy in 2013 after a decade in development. The policy charts a new climate-compatible development path that harnesses domestic renewable energy resources, minimizes environmental damage, and spurs social opportunity, economic growth, and innovation.

To translate these intentions into action, the CARICOM Secretariat commissioned the Caribbean Sustainable Energy Roadmap and Strategy (C-SERMS), designed to build on existing efforts in the region and to provide CARICOM member states with a coherent strategy for transitioning to sustainable energy. In this C-SERMS Baseline Assessment and Report, the Worldwatch Institute provides an analysis of the region’s current energy and energy policy situation, evaluates regional potential for renewable energy and energy efficiency solutions, and recommends regional targets for energy sector transformation in the short, medium, and long terms.

THE Caribbean Community’s (Caricom) well prepared and experienced team of negotiators, and a focused, unified campaign, helped Caricom get its red line climate change issues all represented in the final Agreement at the just ended Climate Change conference, COP 21, in Paris, France.

Caricom Secretary-General Irwin LaRocque has hailed the strong regional collaboration, given the critical importance of climate change to the region’s survival.

“We saw our community operating at its best on the international front in Paris,” LaRocque stated emphatically as he reflected on the 30 November to 11 December conference that led to the approval of an historic Climate Change Agreement by 195 countries.

On December 12 in Paris, France’s Foreign Minister, Laurent Fabius, brought to a close the UN climate change conference, COP 21.“I now invite the COP to adopt the decision entitled Paris Agreement outlined in the document,” he said, and then seconds later: “Looking out to the room I see that the reaction is positive, I see no objections. The Paris agreement is adopted.”

It was, according to some reports, an act of brinkmanship, as unresolved last minute concerns had been expressed by Nicaragua and there was, in a part of the final draft text, a difficulty surrounding US concerns about the use of the word ‘shall’ rather than the more discretionary word ‘should’; but with mysteriously, a typographical error being declared, the deal was done.

Apart from it demonstrating Mr Fabius’ outstanding ability to bring to a conclusion a multi-dimensional meeting in which unanimity was required if the world was…

As a small island economy with little industrial production and hence small emissions of green house gases, Barbados is not considered a major player when it comes to causing problems associated with climate change.

However, its small island status, and economic vulnerability means that Barbados, like its Caribbean neighbours and other small islands is likely to be the major victim of climate change.

One of the major concerns would be the impact a hotter earth and more damaged ozone layer would likely have on tourism and the environment, including the ecosystem.

Four years ago, the United Nations Economic Commission For Latin America And The Caribbean produced a report entitled An Assessment Of The Economic Impact Of Climate Change On The Tourism Sector Of Barbados.

It observed that Caribbean islands “contribute less than one per cent to global GHG emissions, yet these countries are…